PepsiCo Inc. is an American multinational food, snack and beverage corporation headquartered in Purchase, New York, United States, with interests in the manufacturing, marketing, and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which includes an acquisition of Tropicana in 1998 and of Quaker Oats in 2001, which added the Gatorade brand to its portfolio.

As of January 26, 2012, 22 of PepsiCo's brands generated retail sales of more than $1 billion apiece,[2] and the company's products were distributed across more than 200 countries, resulting in annual net revenues of $43.3 billion. Based on net revenue, PepsiCo is the second largest food and beverage business in the world. Within North America, PepsiCo is the largest food and beverage business by net revenue.

Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006. The company's beverage distribution and bottling is conducted by PepsiCo as well as by licensed bottlers in certain regions. Approximately 274,000 employees[3] generated $66.415 billion in revenue as of 2013.[1]

History

Origins

The recipe for the soft drink Pepsi was first developed in the 1880s by Caleb Bradham, a pharmacist and industrialist from New Bern, North Carolina. He coined the name "Pepsi-Cola" in 1898. As the cola developed in popularity, he created the Pepsi-Cola Company in 1902 and registered a patent for his recipe in 1903.[4] The Pepsi-Cola Company was first incorporated in the state of Delaware in 1919.[5] The company went bankrupt in 1931 and on June 8 of that year, the trademark and syrup recipe were purchased by Charles Guth who owned a syrup manufacturing business in Baltimore, Maryland. Guth was also the president of Loft, Incorporated, a leading candy manufacturer, and he used the company's labs and chemists to reformulate the syrup. He further contracted to stock the soda in Loft's large chain of candy shops and restaurants, which were known for their soda fountains, used Loft resources to promote Pepsi, and moved the soda company to a location close by Loft's own facilities in New York City. In 1935, the shareholders of Loft sued Guth for his 91% stake of Pepsi-Cola Company in the landmark case Guth v. Loft Inc. Loft won the suit and on May 29, 1941 formally absorbed Pepsi into Loft, which was then re-branded as Pepsi-Cola Company that same year. Loft restaurants and candy stores were spun off at this time. In the early 1960s, Pepsi-Cola's product lines expanded with the creation of Diet Pepsi and purchase of Mountain Dew.[6]

In 1965, the Pepsi-Cola Company merged with Frito-Lay, Inc. to become PepsiCo, Inc.. At the time of its foundation, PepsiCo was incorporated in the state of Delaware and headquartered in Manhattan, New York. The company's headquarters were relocated to their present location of Purchase, New York in 1970,[7] and in 1986 PepsiCo was reincorporated in the state of North Carolina.[5]

In August 2009, PepsiCo made a $7 billion offer to acquire the two largest bottlers of its products in North America: Pepsi Bottling Group and PepsiAmericas. In 2010 this acquisition was completed, resulting in the formation of a new wholly owned subsidiary of PepsiCo, Pepsi Beverages Company.[21] In February 2011, the company made its largest international acquisition by purchasing a two-thirds (majority) stake in Wimm-Bill-Dann Foods, a Russian food company that produces milk, yogurt, fruit juices, and dairy products.[22] When it acquired the remaining 23% stake of Wimm-Bill-Dann Foods in October 2011, PepsiCo became the largest food and beverage company in Russia.[23][24]

In July 2012, PepsiCo announced a joint venture with the Theo Muller Group which was named Muller Quaker Dairy. This marked PepsiCo's first entry into the dairy space in the US.[25]

Competition

The Coca-Cola Company has historically been considered PepsiCo's primary competitor in the beverage market,[26] and in December 2005, PepsiCo surpassed The Coca-Cola Company in market value for the first time in 112 years since both companies began to compete. In 2009, The Coca-Cola Company held a higher market share in carbonated soft drink sales within the U.S.[27] In the same year, PepsiCo maintained a higher share of the U.S. refreshment beverage market, however, reflecting the differences in product lines between the two companies.[27] As a result of mergers, acquisitions and partnerships pursued by PepsiCo in the 1990s and 2000s, its business has shifted to include a broader product base, including foods, snacks and beverages. The majority of PepsiCo's revenues no longer come from the production and sale of carbonated soft drinks.[28] Beverages accounted for less than 50 percent of its total revenue in 2009. In the same year, slightly more than 60 percent of PepsiCo's beverage sales came from its primary non-carbonated brands, namely Gatorade and Tropicana.[27]

PepsiCo's product mix as of 2012 (based on worldwide net revenue) consists of 63 percent foods, and 37 percent beverages.[27] On a worldwide basis, the company's current products lines include several hundred brands that in 2009 were estimated to have generated approximately $108 billion in cumulative annual retail sales.[29]

Areas of business

The structure of PepsiCo's global operations has shifted multiple times in its history as a result of international expansion, and as of 2010 it is separated into four main divisions:[31]PepsiCo Americas Foods, PepsiCo Americas Beverages, PepsiCo Europe, and PepsiCo Asia, Middle East and Africa. As of 2009, 71 percent of the company's net revenues came from North and South America, 16 percent from Europe and 13 percent from Asia, the Middle East and Africa.[32] Approximately 285,000 people are employed by PepsiCo worldwide as of 2010.[33]

PepsiCo Americas Foods

PepsiCo Americas Foods consists of the company's food and snack operations in North and South America. This operating division is further segmented into Frito-Lay North America, Quaker Foods & Snacks, Sabritas, Gamesa, and Latin America Foods. Food and snack sales in North and South America combined contributed 48 percent of PepsiCo's net revenue in 2009. Until November 2009, Christopher Furman, President of Ventura Foods Inc., occupied the position of Food Services CEO.[29][34][35]

Frito-Lay North America, the result of a merger in 1961 between the Frito Company and the H.W. Lay Company, produces the top selling line of snack foods in the U.S. Its main brands in the U.S., Canada and Mexico and include Lay's and Ruffles potato chips, Doritos tortilla chips, Tostitos tortilla chips and dips, Cheetos cheese flavored snacks, Fritos corn chips, Rold Gold pretzels, Sun Chips and Cracker Jack popcorn. Products made by this division are sold to independent distributors and retailers, and are transported from Frito-Lay's manufacturing plants to distribution centers, principally in vehicles owned and operated by the company.[36]

Sabritas and Gamesa are two of PepsiCo's food and snack business lines headquartered in Mexico, and they were acquired by PepsiCo in 1966 and 1990, respectively. Sabritas markets Frito-Lay products in Mexico, including local brands such as Poffets, Rancheritos, Crujitos and Sabritones. Gamesa is the largest manufacturer of cookies in Mexico, distributing brands such as Emperador, Arcoiris and Marías Gamesa.[38]

PepsiCo's Latin America Foods (Spanish: Snacks América Latina) operations market and sell primarily Quaker- and Frito-Lay-branded snack foods within Central and South America, including Argentina, Brazil, Peru and other countries in this region.[39] Snacks América Latina purchased Peruvian company Karinto S.A.C. including its production company Bocaditas Nacionales (with three production facilities in Peru) from the Hayashida family of Lima in 2009, adding the Karito brand to its product line, including Cuates, Fripapas, and Papi Frits.[40]

PepsiCo Americas Beverages

This division contributed 23 percent of PepsiCo's net revenue as of 2009,[29] and involves the manufacture (and in some cases licensing), marketing and sales of both carbonated and non-carbonated beverages in North, Central and South America.[41] The main brands distributed under this division include Pepsi, Mountain Dew, Gatorade, 7 Up (outside the U.S.), Tropicana Pure Premium orange juice, Sierra Mist, SoBe Lifewater, Tropicana juice drinks, AMP Energy, Naked Juice and Izze. Aquafina, the company's bottled water brand, is also marketed and licensed through PepsiCo Americas Beverages.[42]

PepsiCo also has formed partnerships with several beverage brands it does not own, in order to distribute or market them with its own brands.[42] As of 2010, its partnerships include: Starbucks (Frappuccino, DoubleShot and Iced Coffee), Unilever's Lipton brand (Lipton Brisk and Lipton Iced Tea), and Dole (licensed juices and drinks).

The company started a new market strategy to sell their Pepsi Cola product in Mexico, stating that about one third of the population has difficulty pronouncing "Pepsi". They started manufacturing and selling their product under the label 'Pécsi', the advertisement campaign features the Mexican soccer celebrity Cuauhtémoc Blanco. This is not the first time it has happened, back in 2009, PepsiCo used the same strategy successfully in Argentina.[43][44]

Pepsico will market and distribute Starbucks products in several Latin American countries for 2016.[45]

PepsiCo Europe

PepsiCo began to expand its distribution in Europe in the 1980s, and in 2009 it made up 16 percent of the company's global net revenue.[29] Unlike PepsiCo's Americas business segments, both foods and beverages are manufactured and marketed under one umbrella division in this region, known as PepsiCo Europe. The primary brands sold by PepsiCo in Europe include Pepsi-Cola beverages, Frito-Lay snacks, Tropicana juices and Quaker food products, as well as regional brands unique to Europe such as Walkers crisps, Copella, Paw Ridge, Snack-a-Jack, Duyvis and others. PepsiCo also produces and distributes the soft drink 7UP in Europe via license agreement.[42]

PepsiCo's European presence expanded in Russia in 2009 as the company announced a $1B investment,[46] and with its acquisition of Russian juice and dairy product brand Wimm-Bill-Dann Foods in December 2010 and Lebedyansky juice producer in March 2008.[47]

PepsiCo Asia, Middle East & Africa

The most recently created operating division of PepsiCo covers Asia, the Middle East and Africa.[28] In addition to the production and sales of several worldwide Pepsi-Cola, Quaker Foods and Frito-Lay beverage and food product lines (including Pepsi and Doritos), this segment of PepsiCo's business markets regional brands such as Mirinda, Kurkure and Red Rock Deli, among others.[42] While PepsiCo owns its own manufacturing and distribution facilities in certain parts of these regions, more of this production is conducted via alternate means such as licensing (which it does with Aquafina), contract manufacturing, joint ventures and affiliate operations. PepsiCo's businesses in these regions, as of 2009, contributed 13 percent to the company's net revenue worldwide.[29] In August 2012, PepsiCo signed an agreement with a local Myanmar distributor to sell its softdrinks after a 15-year break to re-enter the country.[48]

In November 2014, the firm's president Zein Abdalla announced he would be stepping down from his position at the firm by the end of 2015.[53]

Headquarters

The PepsiCo headquarters are located in the neighborhood of Purchase, New York, in the town of Harrison, New York. It was one of the last architectural works by Edward Durell Stone. It consists of seven three-story buildings. Each building is connected to its neighbor through a corner. The property includes the Donald M. Kendall Sculpture Gardens with 45 contemporary sculptures open to the public. Works include those of Alexander Calder, Henry Moore, and Auguste Rodin. Westchester Magazine stated "The buildings' square blocks rise from the ground into low, inverted ziggurats, with each of the three floors having strips of dark windows; patterned pre-cast concrete panels add texture to the exterior surfaces." In 2010 the magazine ranked the building as one of the ten most beautiful buildings in Westchester County.[54] Due to renovations of the headquarters, the offices are temporarily set up at 1111 Westchester Ave.[when?]

At one time PepsiCo had its headquarters in 500 Park Avenue in Midtown Manhattan, New York City.[55] In 1956 PepsiCo paid $2 million for the original building.[56] PepsiCo built the new 500 Park Avenue in 1960.[57] In 1966, Mayor of New York CityJohn Lindsay started a private campaign to convince PepsiCo to remain in New York City.[58] Six months later, the company announced that it was moving to 112 acres (45 ha) of the Blind Brook Polo Club in Westchester County.[59] After PepsiCo left the Manhattan building, it became known as the Olivetti Building.[57]

Charitable activities

PepsiCo has maintained a philanthropic program since 1962 called the PepsiCo Foundation,[60] in which it primarily funds "nutrition and activity, safe water and water usage efficiencies,[61] and education," according to the foundation's website.[62] In 2009, $27.9 million was contributed through this foundation, including grants to the United Way[63] and YMCA,[64] among others.

In 2009, PepsiCo launched an initiative they call the Pepsi Refresh Project,[65] in which individuals submit and vote on charitable and nonprofit collaborations.[66] The main recipients of grants as part of the refresh project are community organizations with a local focus and nonprofit organizations, such as a high school in Michigan that—as a result of being selected in 2010—received $250,000 towards construction of a fitness room.[67] Following the Gulf of Mexico oil spill in the spring of 2010, PepsiCo donated $1.3 million to grant winners determined by popular vote.[68] As of October 2010, the company had provided a cumulative total of $11.7 million in funding, spread across 287 ideas of participant projects from 203 cities in North America.[69] In late 2010, the refresh project was reported to be expanding to include countries outside of North America in 2011.[70]

Environmental record and product nutrition

According to its 2009 annual report, PepsiCo states that it is "committed to delivering sustainable growth by investing in a healthier future for people and our planet,"[29][71] which it has defined in its mission statement since 2006 as "Performance with Purpose".[72] According to news and magazine coverage on the subject in 2010, the objective of this initiative is to increase the number and variety of healthier food and beverage products made available to its customers,[73] employ a reduction in the company's environmental impact,[74] and to facilitate diversity and healthy lifestyles within its employee base.[citation needed] Its activities in regards to the pursuit of its goals—namely environmental impacts of production and the nutritional composition of its products—have been the subject of recognition from health and environmental advocates and organizations, and at times have raised concerns among its critics. As the result of a more recent focus on such efforts, "critics consider (PepsiCo) to be perhaps the most proactive and progressive of the food companies", according to former New York Times food industry writer Melanie Warner in 2010.[75]

Environmental record

Rainforests and palm oil

PepsiCo Palm Oil Commitments[76] published in May 2014 were welcomed by media as a positive step towards ensuring that the company's palm oil purchases will not contribute to deforestation and human rights abuses in the palm oil industry. NGOs warned however[77] that the commitments did not go far enough, and in light of the deforestation crisis in Southeast Asia, have called on the company to close the gaps in its policies immediately.

Genetically Modified Food Ingredients

PepsiCo has contributed $1,716,300 to oppose the passage of California Proposition 37, which would mandate the disclosure of genetically modified crops used in the production of California food products.[78][79][80] PepsiCo believes "that genetically-modified products can play a role in generating positive economic, social and environmental contributions to societies around the world; particularly in times of food shortages."[81]

Water usage (India, U.S., U.K.)

PepsiCo's usage of water was the subject of controversy in India in the early and mid-2000s in part because of the company's alleged impact on water usage in a country where water shortages are a perennial issue. In this setting, PepsiCo was perceived by India-based environmental organizations as a company that diverted water to manufacture a discretionary product, making it a target for critics at the time.[82]

As a result, in 2003 PepsiCo launched a country-wide program to achieve a "positive water balance" in India by 2009.[83] In 2007, PepsiCo's CEO Indra Nooyi made a trip to India to address water usage practices in the country, prompting prior critic Sunita Narain, director of the Centre for Science & Environment (CSE), to note that PepsiCo "seem(s) to be doing something serious about water now."[82] According to the company's 2009 corporate citizenship report,[71] as well as media reports at the time,[75] the company (in 2009) replenished nearly six billion liters of water within India, exceeding the aggregate water intake of approximately five billion liters by PepsiCo's India manufacturing facilities.[71]

Water usage concerns have arisen at times in other countries where PepsiCo operates. In the U.S., water shortages in certain regions resulted in increased scrutiny on the company's production facilities, which were cited in media reports as being among the largest water users in cities facing drought—such as Atlanta, Georgia.[84][85] In response, the company formed partnerships with non-profit organizations such as the Earth Institute and Water.org, and in 2009 began cleaning new Gatorade bottles with purified air instead of rinsing with water, among other water conservation practices.[86] In the United Kingdom, also in response to regional drought conditions, PepsiCo snacks brand Walkers' reduced water usage at its largest potato chip facility by 45 percent between the years 2001 and 2008. In doing so, the factory used machinery that captured water naturally contained in potatoes, and used it to offset the need for outside water.[87][88]

As a result of water reduction practices and efficiency improvements, PepsiCo in 2009 saved more than 12 billion liters of water worldwide,[89] compared to its 2006 water usage. Environmental advocacy organizations including the Natural Resources Defense Council and individual critics such as Rocky Anderson (mayor of Salt Lake City, Utah) voiced concerns in 2009, noting that the company could conserve additional water by refraining from the production of discretionary products such as Aquafina.[90] The company maintained its positioning of bottled water as "healthy and convenient", while also beginning to partially offset environmental impacts of such products through alternate means, including packaging weight reduction.[90]

Pesticide regulation (India)

PepsiCo's India operations were met with substantial resistance in 2003 and again in 2006, when an environmental organization in New Delhi made the claim that, based on its research, it believed that the levels of pesticides in PepsiCo (along with those from rival The Coca-Cola Company), exceeded a set of proposed safety standards on soft drink ingredients that had been developed by the Bureau of Indian Standards.[91] PepsiCo denied the allegations, and India's health ministry has also dismissed the allegations—both questioning the accuracy of the data compiled by the CSE, as it was tested by its own internal laboratories without being verified by outside peer review.[92][93] The ensuing dispute prompted a short-lived ban on the sale of PepsiCo and The Coca-Cola Company soft drinks within India's southwestern state of Kerala in 2006;[94] however this ban was reversed by the Kerala High Court one month later.[95]

In November 2010, the Supreme Court of India invalidated a criminal complaint filed against PepsiCo India by the Kerala government, on the basis that the beverages did meet local standards at the time of the allegations. The court ruling stated that the "percentage of pesticides" found in the tested beverages was "within the tolerance limits subsequently prescribed in respect of such product," since at the time of testing "there was no provision governing pesticide adulteration in cold drinks."[96][97] In 2010, PepsiCo was among the 12 multinational companies that displayed "the most impressive corporate social responsibility credentials in emerging markets", as determined by the U.S. Department of State.[98] PepsiCo's India unit received recognition on the basis of its water conservation and safety practices and corresponding results.[99]

Packaging and recycling

Environmental advocates have raised concern over the environmental impacts surrounding the disposal of PepsiCo's bottled beverage products in particular, as bottle recycling rates for the company's products in 2009 averaged 34 percent within the U.S.[100] The company has employed efforts to minimize these environmental impacts via packaging developments combined with recycling initiatives. In 2010, PepsiCo announced a goal to create partnerships that prompt an increase in the beverage container recycling rate in the U.S. to 50 percent by 2018.[101]

One strategy enacted to reach this goal has been the placement of interactive recycling kiosks called "Dream Machines" in supermarkets, convenience stores and gas stations, with the intent of increasing access to recycling receptacles.[102][103] The use of resin to manufacture its plastic bottles has resulted in reduced packaging weight, which in turn reduces the volume of fossil fuels required to transport certain PepsiCo products. The weight of Aquafina bottles was reduced nearly 40 percent, to 15 grams, with a packaging redesign in 2009. Also in that year, PepsiCo brand Naked Juice began production and distribution of the first 100 percent post-consumer recycled plastic bottle.[104]

On March 15, 2011, PepsiCo unveiled the world's first plant-based PET bottle. The bottle is made from plant-based materials, such as switch grass, corn husks, and pine bark, and is 100% recyclable. PepsiCo plans to use more by-products (of their manufacturing processes) such as orange peels and oat hulls in the bottles. PepsiCo has identified methods to create a molecular structure that is the same as normal petroleum-based PET—which will make the new bottle technology, dubbed "Green Bottle", feel the same as normal PET. PepsiCo will pilot production in 2012, and upon successful completion of the pilot, intends moving to full-scale commercialization.[105]

Energy usage and carbon footprint

PepsiCo, along with other manufacturers in its industry, has drawn criticism from environmental advocacy groups for the production and distribution of plastic product packaging, which consumed an additional 1.5 billion US gallons (5,700,000 m3) of petrochemicals in 2008. These critics have also expressed apprehension over the production volume of plastic packaging, which results in the emission of carbon dioxide.[106] Beginning largely in 2006, PepsiCo began development of more efficient means of producing and distributing its products using less energy,[107] while also placing a focus on emissions reduction.[106] In a comparison of 2009 energy usage with recorded usage in 2006, the company's per-unit use of energy was reduced by 16 percent in its beverage plants and 7 percent in snack plants.[71]

In 2009, Tropicana (owned by PepsiCo) was the first brand in the U.S. to determine the carbon footprint of its orange juice product, as certified by the Carbon Trust, an outside auditor of carbon emissions.[108] Also in 2009, PepsiCo began the test deployment of so-called "green vending machines", which reduce energy usage by 15 percent in comparison to average models in use. It developed these machines in coordination with Greenpeace, which described the initiative as "transforming the industry in a way that is going to be more climate-friendly to a great degree."[108]

Product nutrition

Product diversity

From its founding in 1965 until the early 1990s, the majority of PepsiCo's product line consisted of carbonated soft drinks and convenience snacks. PepsiCo broadened its product line substantially throughout the 1990s and 2000s with the acquisition and development of what its CEO deemed as "good-for-you" products, including Quaker Oats, Naked Juice and Tropicana orange juice.[109] Sales of such healthier-oriented PepsiCo brands totaled $10 billion in 2009, representing 18 percent of the company's total revenue in that year. This movement into a broader, healthier product range has been moderately well received by nutrition advocates; though commentators in this field have also suggested that PepsiCo market its healthier items as aggressively as less-healthy core products.[110]

In response to shifting consumer preferences and in part due to increasing governmental regulation, PepsiCo in 2010 indicated its intention to grow this segment of its business, forecasting that sales of fruit, vegetable, whole grain and fiber-based products will amount to $30 billion by 2020.[111][112] To meet this intended target, the company has said that it plans to acquire additional health-oriented brands while also making changes to the composition of existing products that it sells.[112]

Ingredient changes

Public health advocates have suggested that there may be a link between the ingredient makeup of PepsiCo's core snack and carbonated soft drink products and rising rates of health conditions such as obesity and diabetes. The company aligns with personal responsibility advocates, who assert that food and beverages with higher proportions of sugar or salt content are fit for consumption in moderation by individuals who also exercise on a regular basis.[113]

Changes to the composition of its products with nutrition in mind have involved reducing fat content, moving away from trans-fats, and producing products in calorie-specific serving sizes to discourage overconsumption, among other changes.[73] One of the earlier ingredient changes involved sugar and caloric reduction, with the introduction of Diet Pepsi in 1964 and Pepsi Max in 1993—both of which are variants of their full-calorie counterpart, Pepsi. More recent changes have consisted of saturated fat reduction, which Frito-Lay reduced by 50% in Lay's and Ruffles potato chips in the U.S. between 2006 and 2009.[113] Also in 2009, PepsiCo's Tropicana brand introduced a new variation of orange juice (Trop50) sweetened in part by the plant Stevia, which reduced calories by half.[113] Since 2007, the company also made available lower-calorie variants of Gatorade, which it calls "G2".[114]

Distribution to children

As public perception placed additional scrutiny on the marketing and distribution of carbonated soft drinks to children, PepsiCo announced in 2010 that by 2012, it will remove beverages with higher sugar content from primary and secondary schools worldwide.[115] It also, under voluntary guidelines adopted in 2006, replaced "full-calorie" beverages in U.S. schools with "lower-calorie" alternatives, leading to a 95 percent reduction in the 2009 sales of full-calorie variants in these schools in comparison to the sales recorded in 2004.[116] In 2008, in accordance with guidelines adopted by the International Council of Beverages Associations, PepsiCo eliminated the advertising and marketing of products that do not meet its nutrition standards, to children under the age of 12.[117][118]

↑ 57.057.1D. J. "The Bunshaft style." The New York Times. July 23, 1972. Magazine SM12. Retrieved on February 2, 2011. "In 1960, the PepsiCo (now Olivetti) Building went up at 500 Park Avenue, and a year after that the imposing Chase Manhattan Building went much farther up[...]"